Capital Gains on company sale

incubus1980

Hi,

I have recently found out that the company I work for is going to be taken over and anyone with shares/options is going to make some money.

This is great news but looking at what the tax man might take makes me very sad indeed.

I have shares that I own outright since around 2005. I also have EMI options which are over a year old and emi options that are less than a year old.

I've read through the various literature on the HMRC website and it is mind boggling. I simply do not understand how much tax I will need to pay as the different shares seem to attract different rates and obviously the less tax I need to pay the better. I'm looking for some advice on ways I can reduce my tax bill on these shares. I don't mind putting the money away if it means I get to keep more of it (although sticking it in my pension is not too favourable at the moment as i'm still very young). Ideally I want to use all the money towards my mortgage but I can't overpay until next year so I would quite happily squirrel it away until then!

I would be grateful for any advice anyone can give.

Regards,

Incubus

incubus1980

forgot to say, we are not allowed to transfer our shares to partners/spouse so not sure if there is any other way to use my wives allowance and I also do not have a 5% stake in the company so entrepreneurs relief is not an option either

holly_hobby

Each person has their own annual cgt exemption, it is non-transferrable even to spouse's, neither can unused allowance be carried forward from 1 fiscal year to another (although reported losses may be reported for use against future chargeable events).

Each persons annual CGT exemption is £10,900 for 2013/2014.

CGT is only liable upon sale or transfer (ie a chargeable event), and is based on your actual gain (which is sale price LESS acquisition price or value if inherited/gifted LESS associated acquisition/disposal costs.

If selling the shares in 1 go is likely to raise a net gain in excess of your unused CGT allowance, then simply stagger the sales over 2 tax yrs - your new tax and new exemption starts 6 April 2014.

some more reading ....

http://www.hmrc.gov.uk/cgt/shares/basics.htm

Hope this helps

Holly

incubus1980

Thanks Holly Hobby,

unfortunately we are being forced to sell all of our shares/options in one go as the company is being bought so I do not have the option to keep some back until the next years allowance starts again.

I've read through all of the literature but its really confusing. Someone has suggested I pay a tax lawyer to help me out but they're so expensive and with no guarantee they'll even be able to save me anything more than I know about already.

Cheers,

Incubus

holly_hobby

Read the HMRC links, phone HMRC.

No actual advice can be given here, as we haven't performed a client review, and from your point of view, this is a free forum so you have no indemnity protection if you act on incorrect comment.

So, you may like many others have to bite the bullet and pay for a tax practioners (indemnified) professional experience and knowledge.

Hope this helps

Holly

jimmo

In a company takeover situation the main chance of spreading the tax liability is normally if you have the opportunity to take loan notes or debentures in lieu of cash. The tax treatment then depends on whether the loan notes or debentures are Qualifying Corporate Bonds (QCBs) or not.

Is there such an option?

incubus1980

Jimmo, unfortunately not. I guess they've picked the easiest option which is to simple transfer the cash into our accounts.

Do you know, if I take all my money and buy shares in another company do I have to pay tax on that money then?

Cheers,

Incubus

John_Pierpoint

Are you talking about your part in the demise of a former powerful British industry?.

Once upon a time a bigger exporter to the USA than all of the car industry put together?

http://en.wikipedia.org/wiki/EMI

pjcox2005

Arguably you've already done your tax plannning already by taking part in an EMI scheme so that the uplift in value is a CGT rates rather than income tax. I'd think there would be limited you can do to reduce this further although others may come up with ideas.

At a high level I'd expect:

Gain on shares held (proceeds less acquisition costs) to be taxed at 28%

EMI options - original tranche - Growth since grant to be at 28%

EMI options - second tranche - if issued after 6 April 2012 then entrepreneurs relief may apply reducing the gain on the growth since grant to 10%.

somethingcorporate

Could you club together with some colleagues and share the cost of advice?

incubus1980

@John_Pierpoint: Lol, no but i'm sure when it happens the google searches on how to reduce CGT will go through the roof!

@pjcox2005: Yeah, from what I see i've got some at 10% and some at 28%.

@somethingcorporate: Good idea, i'll ask around.

Cheers Guys